Japan's Economy Minister Minoru Kiuchi has cautioned that the country has not yet met the criteria to officially declare an end to deflation, highlighting a growing divide with the Bank of Japan (BOJ). Kiuchi, a close ally of Prime Minister Sanae Takaichi, emphasized the need for more evidence before making such a declaration, particularly given concerns about persistent price declines. His remarks come ahead of the BOJ's upcoming policy meeting, where the central bank is expected to signal that underlying inflation has reached its 2% target.
The government's stance contrasts with the BOJ's assessment, which suggests that inflation may have hit the target due to factors like the Iran war-induced energy shock and rising import costs from a weak yen. Core consumer inflation, which excludes volatile fresh food but includes fuel costs, rose 2.1% in September from a year earlier, challenging the government's view that deflation has not yet been fully overcome.
Analysts suggest that the government's reluctance to declare an end to deflation may stem from concerns that doing so could limit its ability to pursue accommodative fiscal and monetary policies. Declaring victory over deflation could also prompt calls to revise a joint government-BOJ statement from 2013, which pledges coordinated efforts to end deflation, including pursuing monetary easing to achieve the BOJ's inflation target.
Kiuchi, known for advocating loose monetary policy, has expressed reservations about the BOJ's rate-hike plans. He hopes to attend the central bank's policy meeting next week, where the BOJ is expected to keep interest rates steady but revise its inflation forecast upward, signaling its resolve to continue hiking borrowing costs.